By Tim Dixon - Strata Real Estate Services
Increasing your sources of revenue by adding strata management to your business may help your agency to grow despite a tough economic climate.
Accountants usually say “cut your marketing and cut your staff when times get tough”, but what you need to do is to maintain and grow your revenues. For the best agencies, a tough climate means opportunities that lead to an increase in market share and revenue. So, could adding strata management to your portfolio help your agency reap such returns?
Strata management: a sound revenue source
Many agencies offer property management and sales only. However strata management is now on the radar of the best and brightest in the industry, including some of the bigger franchises. They have already made tentative moves into the strata space, while other individual agencies and major groups are looking at how strata can grow their profitability. This is occurring for the following reasons:
- Property owners want a complete real estate service. They see strata management as part of real estate, not separate from it.
- Repairs and maintenance are a major function of strata management. Most agencies perform this same function for their landlords, so they already have the expertise.
- Strata legislation requires the strata manager to have the owners' details and to communicate with them regularly, with obvious benefits.
- Real estate agencies that offer strata management services develop relationships with all owners in the scheme, not just the landlords they manage.
- The NSW strata market is valued in the vicinity of $200 million in revenue – and growing.
Yet despite these benefits, there are many agencies not playing in the strata management space, at least for the time being. This could be for a number of reasons, such as the ratio of set-up costs to revenue; the belief that strata management is complaints-driven with many manual processes and significant paperwork compared to sales or property management; the complexity of strata industry legislative requirements; and, in the past, the fact that agencies could be profitable through sales and meet operating costs through a rent roll.
So what’s changed that now makes strata management worthwhile?
- Technology is enabling agents to offer a new service paradigm.
- Web-based IT systems offer clients and agents a fast, efficient, customer-focused service alternative.
- Specialist strata finance and admin hubs allow agencies to concentrate on building client relations.
Benefits of adding strata management services
Adding a complementary revenue source without increasing overhead costs is something that banks love – the long-term income stream and value of strata roll income are big pluses for agencies.
The cashflow from strata management is regular and paid from trust funds, unlike rentals. With a rent roll of 400 properties, it could translate into a $1 million asset when adding strata management to the mix.
Access to the owner database means improved relationships in the community, increased leads for property management, increased sales and listing opportunities, and provides increased visibility and brand awareness in the community.
Issues to consider
There are key issues to consider when evaluating strata for your real estate agency. Your management needs the ability to convert your rent roll into a valuable strata asset and vice versa.
Another important point is the cost of installing the additional strata technology system and the training of staff to ensure your service standard reflects your agency’s market presence.
There will also be the capital cost of buying a strata roll. Doing so could immediately boost revenues, but cause possible operational shock within the agency if you are not prepared for the additional work.
How to make strata management simple
There are easier ways to add strata management to your suite of services and increase your sources of revenue than doing the hard yards yourself:
- Find a provider of a strata admin hub to eliminate the paperwork and allow your agency to focus on growth while doing the strata management functions of repairs and maintenance and relationship building you already offer.
- Find a provider that has a web-based IT platform that delivers customer-focused, results-driven outcomes for your clients and staff.
- Find a trainer and a strata management adviser that have developed all the procedures and systems to ensure the best service standards are maintained and delivered by your agency.
- Find a marketer that provides access to all the strata clients you need to generate listing and sales leads.
With major real estate groups already making a play into strata management – and even more individuals and groups reviewing it – and given the recent developments in technology married with the growth in numbers of strata schemes, now is the time to consider strata management for your agency.
Key factors for successful strata management
This article was first published in the April 2013 edition of the REINSW Real Estate Journal.
- Have the best staff
- Support your staff and their focus on performance
- Spend time on strategies for driving leads to listings
- Never take ‘no’ as closure. Keep the relationship open and be ready to pick up where you left off if the other agencies fail to get results
- Maintain and build community presence and awareness
- Actively seek local property intelligence and build property investment strategies for your clients
- Run ‘wealth through property’ education seminars
- Measure your market share.